Financial Instruments provides an overview of the different types of financial instruments, their primary characteristics and their markets. These instruments include equities, bonds, derivatives and alternative financial investments such as mutual funds, hedge funds, private equity, exchange traded funds etc.
The content of this module is relevant across countries as it focuses on general theories, models and concepts that are applicable universally. Some aspects of the course looks at development in developed and emerging markets.
Previously we have had guest speakers to discuss bottom- and Top-down investing, and strategy, investment philosophy and process, portfolio review, and European equities.
In this module, students develop problem-solving, numerical, analytical, and discursive skills, as well as acquiring knowledge and understanding of financial markets and related concepts.
All of the lecture materials are available on the ELE (Exeter Learning Environment).
Full module specification
|Module title:||Financial Instruments|
|Duration of module:||
Duration (weeks) - term 1: |
This module aims to provide students with a comprehensive overview from the perspective of a fund manager of valuation techniques for equity, bond and derivative instruments. Apart from these financial instruments, the module aims to provide a good understanding of various professionally managed funds and their investment strategies with particular attention given to the various hedge fund strategies. The module aims to give students insights into practical aspects of fund management through lectures/seminars by senior fund managers. The module also aims to provide students with an appreciation of the considerable empirical research literature on issues relating to various financial instruments, portfolio strategies and in the fund management area. The module takes existing instruments and organised markets as its starting point and aims to develop not only a scholarly knowledge of contracts but also a critical ability to judge the appropriate use of each instrument type within a portfolio context. An important aim is to understand the intuition and the logic behind many of the models.
ILO: Module-specific skills
- 1. use critical company and industry analysis for valuing equity securities
- 2. use selectively various approaches to the valuation of traded equity, bond and derivative instruments
- 3. critically appraise the operation of derivative markets and the specifications of instruments traded
- 4. demonstrate knowledge of a wide variety of other investment vehicles as to evaluate critically and comparatively their usefulness to both suppliers and demanders of financial instruments
ILO: Discipline-specific skills
- 5. develop rigorous theoretical arguments based on mathematical and analytical reasoning
- 6. rigorously analyse problems in finance
- 7. interpret financial data and problems in the light of established theories
- 8. access a wide body of empirical research literature and critically appraise it
- 9. use relevant databases, existing research literature and techniques to conduct a detailed investigation of problems arising in financial markets and models
ILO: Personal and key skills
- 10. plan and manage his/her own study both individually and within a group
- 11. make appropriate use of learning resources, including sophisticated computer datasets
- 12. analyse critically problems arising in both academic and practical contexts
Learning activities and teaching methods (given in hours of study time)
|Scheduled Learning and Teaching Activities||Guided independent study||Placement / study abroad|
Details of learning activities and teaching methods
|Category||Hours of study time||Description|
|Contact Hours||33||Lectures and Tutorials|
|Form of assessment||Size of the assessment (eg length / duration)||ILOs assessed||Feedback method|
|Weekly tutorials consisting of numerical and discussion questions||Weekly 1 hour tutorials throughout the term||1-12||Correct solutions and suggested answers.|
Summative assessment (% of credit)
|Coursework||Written exams||Practical exams|
Details of summative assessment
|Form of assessment||% of credit||Size of the assessment (eg length / duration)||ILOs assessed||Feedback method|
|Written Exam||100||2 hours||1-12||Correct solutions and suggested answers.|
Details of re-assessment (where required by referral or deferral)
|Original form of assessment||Form of re-assessment||ILOs re-assessed||Timescale for re-assessment|
|Written Exam||Written Exam 2 hours (100%)||1-12||Aug/Sep|
1. Overview of common financial instruments, financial markets, asset management and the asset allocation process.
2. International stock markets, emerging markets, international diversification, stock market indicators, aspects of financial market regulation and corporate governance.
3. Equity instruments and markets; Approaches to common stock valuation: Discounted cash flow applications, Relative Valuation techniques, Stock-market analysis, Industry analysis, Company analysis and Stock Selection, Equity Risk Premium.
4. Fixed income instruments; Overview of various types of fixed income securities, valuation of fixed income securities, bonds with embedded options, understanding bond ratings, securitization and asset backed securities, risks associated with investing in bonds, understanding yield spreads, interpreting the yield curve, Spot rates and Forward rates, Measurement of interest rate risk, bond portfolio management strategies.
5. Derivatives instruments; Futures and forwards, option payoffs and options strategies, option valuation techniques, hedging techniques, understanding debt and equity as options.
6. Alternative Investments; Hedge funds and Hedge fund strategies, Mutual funds, Fund of Funds, ETFs, Private Equity, Real Estate and Art.
Indicative learning resources - Basic reading
• Reilly, F.K. and Brown, K. (2009) Analysis of Investments and Portfolio Management, 9th edition, UK: South-Western.
• Supplementary reading: Assigned research papers and Articles (these will be made available though the ELE)
Module has an active ELE page?
Last revision date